Alcoholic drinks: propping up the global bar

The importance of the on-trade channel for alcoholic drinks varies widely according to region with Western Europe, which by and large enjoys a strong bar and café culture, holding the highest share for on-trade volume sales of 44%.

Eastern Europe ranks lowest with a share of 18%, having declined since 1997. Economic uncertainty and in particular the crisis in Russia contributed strongly to the overall declining share of on-trade in Eastern Europe. However, with the entry of some of these countries into the EU, Euromonitor expects this trend to change as a greater variety of brands become available and more bars open to cater to a wider range of consumers. These range from the higher spending locals to the tourists who are flocking to the region in ever increasing numbers.

Spain and Brazil lead the way for major markets

Looking at individual countries, of the top 15 major markets for alcoholic drinks, Spain boasts the highest on-trade sales, accounting for 67%. Socialising is a key part of Spanish life. According to a report by the Spanish Economic Studies Institute, around 10% of Spanish families' expenditure is dedicated to eating and drinking outside the home.

Furthermore, the high levels of tourism also contribute to on-trade sales, particularly in coastal areas. On-trade sales in Spain have maintained a steady trend over the past few years, buoyed by a healthy economy.

Brazil's on-trade sales share is 64% although that is down from 67% in 1997, as economic uncertainty and rising unemployment continues. While beer and spirits enjoy higher on-trade sales, Euromonitor finds that the opposite is true for wine which is more often drunk at home.

Brazilian wine consumers, although typically wealthy, often regard the prices charged for wine by restaurants to be exorbitant and therefore drink the beverage more commonly at home with friends. A wider variety of wines and a greater level of heavier promotions in specialist shops have also fuelled off-trade sales.

Bar culture: emphatically a way of life for some minor markets

The country that holds the overall world number one spot for on-trade drinking is Ireland. An overwhelming 80% of all alcoholic drink sales are made in the on-trade where a pub environment is traditionally part and parcel of the drinking occasion.

Trends though are shifting as social attitudes toward drink driving have changed from a certain ambivalence to a greater awareness of danger, spurred by government advertising as well as the introduction of tougher penalties over the years.

Furthermore, during the 1990s economic boom, summer barbecues and parties became a more frequent activity. This is set to continue as the booming 20-somethings age group from the 1990s move into their 30s and become homeowners. In their 30s, this demographic group will move away from drinking in bars and pubs, tending to drink and entertain more at home rather than socialise in the pub. The impact of a ban on smoking in all work places, including licensed premises, which took effect from 29 March 2004, is also a further deterrent to pub-goers. It is estimated that in Ireland 45% of drinkers are also smokers.

Three-quarters of Vietnamese sales are in on-trade

In contrast to many other Asian countries, the on-trade is by far the more important in Vietnam accounting for around 75% of sales. Most beer drinkers in Vietnam enjoy the noisy atmosphere of bars, pubs or restaurants where they can drink with friends. Drinking beer is not only a pretext to socialise but is also often an invitation for business negotiations.

Draught beer is essentially consumed in pubs. Bottled beer, wines and spirits are mostly consumed in restaurants and hotels. Although off-trade sales are gradually developing, the on-trade is maintaining its share as the Vietnamese alcoholic drinks market continues to develop.

Who's becoming more sociable?

While the overall world trend is towards an increased share for the off-trade, Euromonitor has identified a few key countries that are bucking this trend. Firstly China, the world's largest alcoholic drinks market, has seen rapid movement towards on-trade sales with its share rising from 25% in 1997 to 30% in 2003.

Restaurants account for the majority of on-trade sales. Chinese people like to form close relationships with their business partners, and thus often talk business at the dining table rather than in the office. Further on-trade development has been hampered by an anti-corruption campaign across the country which has seen corporate hospitality decrease dramatically.

This however has been offset by growing demand in night-spots such as pubs, bars and lounges. With more exposure to the West, many people are turning to such places to socialise and relax. The partying lifestyle is particularly attractive to the young and those in cosmopolitan cities like Shanghai who have the necessary purchasing power.

The Italian wine bar phenonemon

Italy, the eleventh largest alcoholic drinks market, also saw a strong performance for on-trade sales which grew from a 36% share to 42% in the 1997-2003 period. Wine, the favourite Italian beverage, is starting to assume great importance in the on-trade buoyed by the rise in dedicated wine bars.

The phenomenon of wine bars began in big cities such as Rome and Milan and the total number of wine bars has grown by around 150% in the last three years. They are mainly concentrated in the North and Centre of Italy and are characterised by having young management (30-40 years old). These bars tend to be located close to office areas in cities and towns and normally offer food as well as drinks.

A convergence of trends globally

While macro factors like economic conditions, climate, culture and tourism have an obvious impact on the weight of business in the on-trade channel within each country, there are signs of a globalisation of trends. Those regions where the share of on-trade is lower than the average are starting to move upwards with only economic factors acting as an impediment.

However, for Western Europe, the region which is far above the average share, an opposite trend can be seen as tougher drinking laws combined with the increasing competitiveness of retailers contribute to growth in home consumption.